8 barriers that can prevent your company from achieving success

Looking for higher profits? According to U.S. executive and consultant Neil Smith, your business may be only one change away from sustained success.

Smith likes to tell of a client of his, a medical services company, that saved millions of dollars a year by doing less work. The innovation was simple. Working for major insurance companies, Smith’s client conducted two million blood tests a year to weed out new policyholders who had been exposed to the HIV virus. Only a fraction of prospects tested positive, but these tests cost the company $10-million a year.

Then a lab employee came up with a better idea: combine 20 blood samples into one batch, and test that instead of 20 individual samples. This change enabled the company to conduct its tests faster and go deep only on anomalous results, reducing its HIV testing efforts by 90%.

What intrigued Smith most was a similar suggestion had emerged seven years earlier and sunk without a trace. Smith realized that even good companies run into internal barriers that prevent them from being better. He says every company, in every industry, of every size, is sitting on a gold mine of untapped improvements.

In his new book, How Excellent Companies Avoid Dumb Things, Smith leverages his 20 years of leading change-management projects at major U.S. organizations to identify eight “hidden barriers” that prevent companies from achieving greater success:

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Avoiding controversy Smith sees this over and over, at all levels of management: hard-driving CEOs shying away from making tough decisions, such as closing down unprofitable business units. “Even the very best managers will have more than a couple of controversial ideas they do not want to act on,” he writes. Solution: create a robust change-management initiative that encourages the whole company to welcome change. And attribute unpopular decisions to that process, not to anyone’s personal agenda.

Poor use of time There never seems to be time for complex, difficult fixes. “A good change process not only roots out all cases of duplicative or repetitive activities,” Smith writes, “but also questions the true value and need of all activities, while measuring their cost.”

Reluctance to change Again, you find this in all companies, at all levels. “Managers need to let employees know that change is expected and that it starts at the top,” he says. “Culture change is also driven by praising and rewarding people who come up with bright ideas.” Consider this mantra: “Just try it.”

Organizational silos Promising innovations often founder when they try to cross from one department to another. Silos are made to move information up and down — not across. The priorities of parallel silos are rarely aligned, Smith says. “Silos need to work together.” Encourage information-sharing and co-operation between departments, he says: “Turn towers into tunnels.”

Management blockers Even high-performing managers tend to block new projects when they feel threatened by them. By implementing a company-wide review that encourages employees at all levels to identify problems and gaps in the organization, Smith contends you can create an environment where people feel safer about green-lighting change. (Also watch for ideas you yourself have shot down for personal reasons. Businesses, like fish, rot from the head.)

Incorrect information and bad assumptions The medical lab cited above resisted changing its blood-testing procedures because it thought insurance clients would never go for the idea of blending blood samples. Make sure your decisions are based on facts, research and analysis, not opinion.

Size matters Smith says many companies prolong unprofitable operations because they never do the math to realize that a specific market or order size is just too small to be profitable. “Over-servicing customers is one of the most common problems that occur when size is ignored,” he writes. “Merely getting a company and its employees to consider how size matters is a huge first step.” Make sure employees know there will be no recriminations for past mistakes; change is about moving forward.

Existing processes Fixing processes that no longer work is one of the most common — and hardest — tasks in business. If you want change to last, you need to apply all the right traits to your process: authority, a sense of urgency, a goal and attention from senior management. Once they do that, Smith says, companies often find things working so well that they turn their one-time initiative into a long-term process.

Smith’s book also includes 12 principles for breaking through barriers, the most valuable of which is probably No. 9: “Focus on increasing revenue, not just reducing expenses.” Smith says every consulting assignment yields cases of companies forgoing revenue opportunities. By reducing employees’ eagerness to offer discounts, raising fees for services that are particularly annoying or unprofitable to provide, and pricing specialty products based on what the market will bear, not what’s been charged in the past, Smith says companies can boost revenues and build greater support for change management as a whole.

Rick Spence is a writer, consultant and speaker specializing in entrepreneurship. His column appears weekly in the Financial Post. He can be reached at rick@rickspence.ca.